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Cobbe ECO2013 F03 Chapter 8 Page 1 of 16 < When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Sketch the aggregate supply-aggregate demand ( AS-AD ) model and explain how real GDP and unemployment fluctuate in a business cycle. 1 Explain the forces that determine potential GDP and the functional distribution of income between labor and other factors of production. Explain what creates unemployment when the economy is at full employment and describe the influences on the natural unemployment rate. 2 3 Macroeconomists divide the variables that describe macroeconomic performance into two lists: Real variables Nominal variables When the economy is operating at full employment , the forces that determine the real variables are independent of those that determine the nominal variables. Away from full employment , real and monetary forces interact to bring economic fluctuations. UNDERSTANDING MACROECONOMIC PERFORMANCE
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